As I travel down I 95 through Philly I pass a billboard (please see below) , with the Subject: Recession 101. these billboards are well over 2000 now nationwide. The money was donated by an anonymous donor on the east coast to help people keep proper perspective through the recession. When I saw this last week on my way to see a client who was making another major investment in his Company, I felt compelled to share with my readers what is happening with investment and why it so critical to more business’s that are actually investing.
When I first wrote the deal with this customer for integrated bar code shipping from Order Entry through product recall back in the spring he expressed an interest in our integrated Traceability module which represented an investment equal to or larger than his initial one with us.
I contacted a mutual business associate and asked if he knew why this customer was being so intent on this additional investment wondering if he just wanted to be “ahead of the curve”. The answer was yes he wanted to be ahead of the curve, he wants to create a Competitive Weapon. Part of that curve happens to be Safety Quality Food (SQF) SQf-2000 standard covers Traceability Requirements discussed in issue 235. What does this mean to you well as our good friend Olin Thompson taught us in previous Newsletters.
Business Systems in the Food Industry
How does the food industry see business systems? What are the motivations for the implementation of systems?
There are three strategies driving the implementation of business systems in the food industry: Survival, Improvement, and Competitive Weapon. The figure below shows the level of business function implemented under the three different strategies.
A survival strategy focuses on the cost reduction. Labor savings are the typical justification for this strategy. While the implementation of a new system does result in labor savings initially, over time, these savings tend to erode, or the system falls into disuse because adequate people are not available to support the system’s use. If not carefully monitored, the reason for the system’s implementation can be its ultimate downfall—the system reduces a company’s personnel needs, but without the proper personnel, the system cannot continue to function.
An improvement strategy utilizes business systems to improve the business. Implementation is justified mostly through reductions in inventory, increased customer satisfaction, warehouse efficiency, etc., although labor savings may be a secondary justification.
By considering business systems as competitive weapons, systems and processes are directly connected to the business strategy. Systems become a key part of reducing cost, bringing new products to market faster, etc. Systems are no longer justified by their return-on-investment but rather as a requirement for the company to be successful. For example, unless a company can reduce its time to market for new products, it can never compete for market share.
The COO of a pet food manufacturer stated his company’s justification for a major investment in manufacturing systems this way: “It is all about share. If we upgrade our operations and the competition does not keep up, we gain share. However, we have good competitors so we assume they are doing the same thing, so we will only maintain share. If we do nothing, we will lose share. Justification is simple, maybe we gain share, maybe we maintain share, but at least we will not lose share.”
Now I understand what the billboard really means.
Thanks again Olin.| < Prev | Next > |
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